The summer is over, complacency is dead, and markets are fun again

On Friday, after more than 40 straight days of the S&P 500
closing inside of a 1% range,
markets are selling off as the meme of the summer dies a
quick death.

Complacency,
the dominant theme in markets for the two months since the
June 23 Brexit vote in the UK, has felt as though it's been
the only theme in markets. And now, it seems, this is
over.

Near 2:30 p.m. ET on Friday, the Dow was down over 300 points,
the S&P 500 was down 43 points, and the Nasdaq was off 112.
These were declines of 1.7%, 2%, and 2.1%, respectively, for the
major averages.

investing.com

Russ Certo, head of rates trading at Brean Capital, outlined in a
note to clients on Friday morning that over the last 24 or so
hours, markets have had a lot of headlines to contend with.

And after months of markets not really reacting to anything, it
has been an abrupt shot in the arm.

First, the European Central Bank on Thursday morning was a slight
disappointment, as ECB President Mario Draghi's press conference
came and went without any explicit promises of an extension of
its quantitative easing program.

Certo wrote on Friday that markets have come to assume that the
"next outrageous leg of monetary jolt is entitled." Certo added
that, "The enormity of monetary tidings ... has lulled market
into a sense of regularity regarding the presence of such
stimulus. Draghi disappointed" on Thursday.

On Friday, bond yields were rising around the world, with the
German 10-year bund yield rising
into positive territory for the first time since July 22. US
Treasurys were
flying higher, with the 10-year yield up to 1.67%.

Certo also pointed to a previously overlooked speech from Federal
Reserve Board Governor Lael Brainard scheduled for Monday, the
final day Fed officials can speak before the blackout period
ahead of the Fed's September 21 policy statement, as a factor
weighing on markets.

In a note to clients on Thursday, Peter Hooper at Deutsche Bank
said this speech brings the chances of a rate hike from the Fed
coming on September 21 to around 50%.

"As a dovish member, Brainard would carry a lot of credibility
delivering a more hawkish message" on Monday, Hooper wrote.

Bloomberg pricing as of Friday afternoon put the chances of a
move later this month at around 32%.

Elsewhere in market commentary, Jeff Gundlach, the widely
followed bond investor who runs DoubleLine Funds,
held a webcast on Thursday night outlining his views on
markets and the economy, with the major highlight being
Gundlach's obvious caution on markets right now.

And for a manager who has long been bullish on interest rates
falling, this is a notable shift.

Gundlach said US corporate bonds are highly overvalued and added
that many folks have come around to believe that interest rates
can never rise, particularly as consensus around the
ineffectiveness of negative interest rates solidifies.

"In the investment business, when you hear the word 'never,' that
means it's about to happen," Gundlach
said.